Capital gains are the profit realized when a capital asset is sold for more than its cost basis. They are taxed at preferential long-term rates when held over one year and at ordinary income rates when held one year or less. Capital assets include startup equity, stock options after exercise, and shares received in an exit. For startup founders and early employees, capital gains tax is the dominant tax category at exit, and the difference between short-term and long-term treatment can be 20 percentage points or more on every dollar of proceeds.
The federal long-term capital gains (LTCG) rate schedule for 2025: 0 percent on gains below the lower threshold (roughly $47K single, $94K married filing jointly); 15 percent on gains i...